Exchange Oil & Gas Co. v. Foster

237 So. 2d 904, 37 Oil & Gas Rep. 46, 1970 La. App. LEXIS 5217
CourtLouisiana Court of Appeal
DecidedJune 30, 1970
DocketNo. 8021
StatusPublished
Cited by4 cases

This text of 237 So. 2d 904 (Exchange Oil & Gas Co. v. Foster) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Exchange Oil & Gas Co. v. Foster, 237 So. 2d 904, 37 Oil & Gas Rep. 46, 1970 La. App. LEXIS 5217 (La. Ct. App. 1970).

Opinions

LANDRY, Judge.

This concursus proceeding invoked by Exchange Oil & Gas Company, lessee of defendant Murphy J. Foster and his co-owners of Dixie Plantation, situated in St. Mary Parish, seeks to determine ownership of oil royalties due by virtue of mineral operations conducted on the property. The dispute, between the landowners and certain royalty owners, presents the single issue, namely, whether production from a well located on a part of Dixie Plantation situated within a Commissioner’s compulsory drilling unit interrupted prescription as to the remainder of the plantation located outside the confines of the Commissioner ordered unit. Defendants-landowners appeal the judgment of the trial court rejecting their plea that the royalty interests on that portion of the property outside the unit had prescribed for 10 years non-use. We affirm the decision rendered below.

The stipulated facts are that in 1953 and 1954 the Foster Group, owners of Dixie Plantation, conveyed certain royalty interests therein to W. C. Proctor and Harold T. Shalett, respectively. The Proctor interest is now held by four individuals as trustees for numerous other parties who shall be collectively entitled the “Proctor Group”. The Shalett interest is presently owned by Shalett’s heirs and assigns who shall be denominated the “Shalett Group”.

On or about August 21, 1955, Latex Oil & Gas Company, lessee of the Fosters, completed a producing well on Dixie Plantation. The well, known as the Rose K. Foster Well # 1, produced oil in paying quantities until on or about August 13, 1965. By order No. 274-A, dated March 22, 1956, effective April 1, 1956, the Commissioner of Conservation unitized that portion of Dixie Plantation on which was situated the Rose K. Foster Well # 1 with surrounding properties. The unit thus created was designated Unit J. A second well drilled by Latex on Dixie Plantation produced intermittently from January 18 to April 23, 1956, and thereafter produced nothing. By Commissioner order this well became the unit well for Unit K formed by the Commissioner. Both the Proctor and Shalett Groups have received royalties from the Unit J and Unit K wells from the date of their completion until abandonment..

On February 1, 1965, Exchange obtained a mineral lease on Dixie Plantation and pursuant thereto, on April 25, 1966, completed a well thereon which commenced producing gas on November 22, 1966. This well, known as the Murphy J. Foster No. 1 Well, is not situated within the limits of either Unit J or K.

Exchange has deposited the sum of $28,929.65 in the registry of the Court, said amount being the royalty due on the Murphy J. Foster Well No. 1 through January, 1968. The Foster Group claims the entire 19/640 royalty interest; the Proctor Group demands 13/640; the Shalett Group asserts ownership of 6/640.

The trial court held that production from the Unit J and Unit K Wells located on part of the Dixie Plantation interrupted prescription on the Proctor and Shalett Royalty interests from August 25, 1955, until August 13, 1965, on all parts of the plantation whether within or without the Commissioner’s compulsory units on which the wells were physically located. In effect the trial court held that Trunkline Gas [906]*906Company v. Steen, 249 La. 520, 187 So.2d 720, which involved mineral rights and not royalty interests, was nevertheless apposite and controlling. Appellants-landowners maintain that the lower court erred in (1) holding that production from a unit tract through a well located on that tract has a nature and legal effect different from production from a unit tract through a unit well located on another tract in the unit; (2) failing to follow and apply the rule governing the effect of production from a unit tract on the running of liberative prescription as established in Childs v. Washington, 229 La. 869, 87 So.2d 111; Jumonville Pipe & Machinery Co. v. Federal Land Bank, 230 La. 41, 87 So.2d 721, and Frey v. Miller, La.App., 165 So.2d 43, writs refused, 246 La. 844, 167 So.2d 669, and (3) holding on the authority of Trunk-line, above, that the effect of production from a well on part of a mineral royalty tract in a Commissioner’s Unit has the same effect on the running of liberative prescription on a royalty interest as drilling has upon the running of liberative prescription on mineral rights under similar circumstances.

The question, namely, does production on part of a parent tract, situated in a Commissioner’s Unit, interrupt the running of prescription against royalties on that portion of the parent tract situated outside the unit, appears res nova. A review of the jurisprudence on the question of interruption of prescription on mineral and royalty rights appears necessary.

In Elson v. Mathewes, 224 La. 417, 69 So.2d 734, Mathewes sold Elson a ½ mineral interest in a 91 acre tract. Mathewes leased the entire 91 acres to Arkansas Louisiana Gas Company. Elson leased 40 of the 91 acres to the same lessee. The parties then voluntarily pooled the 40 acre tract with other properties. A producing well was brought in on the unit but not on the 40 acres owned by Mathewes. The question presented was whether the running of ten years prescription against El-son’s Y2 mineral rights in the 51 acres not included in the unit was interrupted by inclusion of the 40 acre tract in a producing unit. The Court noted that the sale of the mineral right established an indivisible servitude in favor of the mineral grantee in the sense that the landowner may not thereafter independently contract with a third party to effect a division of the resulting servitude to the disadvantage of the mineral assignee. The court found, however, that by the terms of the unitization agreement, the landowner and mineral owner agreed to a division or reduction of the servitude to the 40 acre tract inasmuch as the agreement applied solely to the 40 acres and made no mention of the remaining 51 acres. In effect the Court held that prescription ran against the mineral rights to the 51 acre tract as it was separate from the 40 acre plot on which there alone had been an interruption of prescription by virtue of its inclusion in a unit upon which production occurred. Elson, above, establishes the rule that where a voluntary pooling agreement fails to mention part of a servitude not included in the unit, a division or reduction of the servitude results. The effect of such reduction, according to Elson, is that production within the unit but off a tract included therein, interrupts prescription only on that portion of the tract situated within the unit.

In both Childs v. Washington, 229 La. 869, 87 So.2d 111, and Jumonville Pipe and Machinery Co., Inc. v. Federal Land Bank of New Orleans, et al., 230 La. 41, 87 So.2d 721, both involving mineral rights, a Commissioner’s order establishing a unitized pool was deemed to have divided a servitude which was partially within and partially without the unit. In each instance it was held that production within the unit but off the parent tract interrupted prescription on that portion of the servitude within the unit but not as to the remainder of the parent tract located outside the unit. In Childs, above, the court reviewed the jurisprudence which establishes the indivisibility of servitudes insofar as concerns the owner of the servient estate and the divisibility of servitules insofar as [907]*907concerns the rights flowing to the holder of the servitude. The Court quoted at length from Elson, above, and noted that the provisions of our conservation laws become part of the mineral contract, one such provision conferring pooling authority upon the Commissioner.

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Bluebook (online)
237 So. 2d 904, 37 Oil & Gas Rep. 46, 1970 La. App. LEXIS 5217, Counsel Stack Legal Research, https://law.counselstack.com/opinion/exchange-oil-gas-co-v-foster-lactapp-1970.